In Depth

The Obama administration’s move to expand its student loan repayment assistance program – an initiative which
may help some lawyers struggling with debt – has put another spotlight on the debate over the rising cost of law school
tuition.

President Barack Obama signed an executive order June 9 that would expand the Pay As You Earn program to 5 million more borrowers.
This program caps federal student loan payments at 10 percent of the borrower’s income and forgives any amount left
unpaid after 20 years.

Currently, PAYE is available only to those who graduated in 2010 and later. The president is proposing the initiative be
offered to those who borrowed before October 2007 or ceased borrowing by October 2011.

However, as some point out, the executive order does little to address the problem of ballooning college costs.

While Christopher Chapman, executive director of Access Group Inc., praised the expansion of PAYE, he said many factors contribute
to the problem of student loan debt. Part of the solution will have to come from schools making changes to their cost structure.

“No business can consistently increase the price of a product beyond the income of the customer without a negative
impact,” Chapman said, adding schools have been taking “simple steps” to curb costs and provide more value
to students.

Access Group Inc., a nonprofit comprised of 192 American Bar Association-approved law schools, educates and advises student
borrowers who are seeking a professional degree.

Austen Parrish, dean of the Indiana University Maurer School of Law, noted tuition is a complicated issue. Often, he said,
the sticker price is not the true cost law students pay because many receive financial assistance from the school.

He estimated that at IU Maurer, more than 90 percent of the students have been awarded reduced tuition rates with the average
amount of reduction being between $22,000 and $25,000 annually.

In addition, providing a “rich intellectual environment” is not a cheap endeavor, Parrish continued. To be among
the top ranked, law schools must offer students practical experience through clinics and externships with quality faculty
and practitioners.

“It’s unclear that you can provide a high-quality law school education at a bargain basement price,” Parrish
said. “I think the brightest students want to go to a place that provides a full range” of experiences.

The PAYE expansion will not happen immediately. The president has charged the Department of Education with developing the
regulations and having the program available to more borrowers by the end of 2015.

Marvin Smith, director of student financial services at Indiana University-Purdue University Indianapolis, said questions
surrounding how the expansion will be implemented make it difficult to determine how beneficial the program will be to students
on the IUPUI campus, including those enrolled at the Indiana University Robert H. McKinney School of Law.

One very worrisome issue for law school graduates is the president’s apparent contradictory moves. On the one hand,
he wants to increase PAYE while, on the other hand, his FY 2015 budget request would lower loan forgiveness amounts of borrowers
who are in professional and graduate schools.

The White House is proposing to lower the amount of a graduate student’s debt that can be wiped away under the Public
Service Loan Forgiveness program, according to an article written by José Espada, director of medical student financial
aid at the IU School of Medicine. Under Obama’s budget, loan forgiveness would be capped at $57,500.

Chapman sees the expansion of PAYE as a positive move since it will make more student borrowers eligible for repayment assistance.
PAYE and other similar loan repayment programs are good tools for law students and others with high debt and low salaries,
he said.

However, Smith and Chapman said borrowers could actually end up owing more if they participate in the PAYE program. While
the monthly payment will be lowered, the interest rate will not decrease so the balance on the loan could grow. Chapman also
noted that the amount erased is counted as taxable income in the year it is forgiven, requiring borrowers to declare more
in income for that year.•

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